ECO 202F01 Microeconomics Spessard SU18 Homework Final Exam

ECO 202-F01 Microeconomics Spessard SU18 Homework: Final Exam Extra Credit Score: 0 of 1 pt Concept: Merger Standards 1 11 of 15 (13 complete) HW Score: 82.67%, 12.4 of 15 Consider a market with four firms. Suppose the first firm has a 44% market share, the second firm, has a 35% market share, the third and the fourth firm has a 1% market share m has a 20% market share Using the Herfindahl-Hirschman Index (HHI), what is this market\'s level of concentration? Enter a numeric response using an infeger) stion

Solution

Answer:

The formula for Herfindahl–Hirschman Index is as follows -

H = sum of (market share)² of total firms

So, here H = (44)² + (35)² + (20)² + (1)² = 1936 + 1225 + 400 + 1 = 3562.

Now from theorem as we know any value of H above 2500 is indicating highly concentrated market, so we can conclude that, there is high concentration in the market as the market\'s level of concentration is 3562.